Intelsat, South African Firm Team up on New Satellite

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  Space News Business

Intelsat, South African Firm Team up on New Satellite

By PETER B. de SELDING
Space News Staff Writer
posted: 17 December 2008
12:09 pm ET






PARIS
— Intelsat and South African investment firm Convergence Partners have formed a joint venture to launch a C- and Ku-band satellite over
Africa
in early 2011, and the venture already has secured $350 million in advance transponder-lease contracts, the two companies announced Dec. 8.

They said the Intelsat New Dawn satellite, already under construction, would be in operation in early 2011 at Intelsat’s 33 degrees east orbital slot and would cost about $250 million. The New Dawn joint venture, in which Intelsat will have a 74.9 percent equity stake, will finance 85 percent of the project through debt already secured from financial institutions including Nedbank Group and the Industrial Development Corp., both of
South Africa
.

Intelsat Chief Executive David McGlade said in a Dec. 8 interview that New Dawn would replace the Intelsat 11 satellite, which this fall was moved to the 33 degrees east slot after Intelsat’s previous satellite there, the Intelsat 802, suffered an on-board failure.

McGlade
said the joint-venture arrangement with Convergence Partners has an obvious appeal for Intelsat.

“If we can put in $25 million in cash for a satellite project costing $250 million and leverage it at 85 percent, we can use our other resources for investment where we have to finance the entire project,” McGlade said in explaining the deal with Convergence.
Bermuda-headquartered
,
Washington
-based Intelsat is already highly leveraged, and the terms of its debt covenants make it difficult for the company to take on fresh debt in the near term.

McGlade
said the New Dawn joint venture’s debt financing would be nonrecourse to either Intelsat or Convergence Partners, meaning neither of the two partners will be responsible for the venture’s debt payment. Intelsat will operate the New Dawn satellite as an integral part of Intelsat’s overall fleet, he said.

Andile
Ngcaba, chairman of Convergence Partners, said his company, in addition to financing 25.1 percent of the equity, would assist Intelsat in finding additional customers for New Dawn.

While Convergence Partners was established in 2004 under
South Africa
‘s Black Economic Empowerment legal regime, the Intelsat joint venture “is a purely commercial investment,” Ngcaba said in a Dec. 8 interview. He said Convergence, in which Nedbank Group of
South Africa
is a principal founding investor, has raised nearly $100 million to date.

Ngcaba
said the South African government has not been guaranteed any capacity on the satellite. He said the strength of demand in
Africa
is such that lenders are willing to commit to a project like New Dawn even in the currently stressed credit-market environment.

“We all understand how markets are now,” Ngcaba said. “We have put equity into the venture because of the demand in
Africa
and the different applications [the satellite] can serve. The fact that 50 percent or more of the capacity has been taken up already” demonstrates the project’s solid financial ground, he said.

McGlade
said Intelsat and Convergence began planning the New Dawn project two years ago, well before the current financial crisis, giving lenders time to become comfortable with the joint venture. “We’ve been out marketing the capacity for a few months,” McGlade said.

The New Dawn satellite, which one industry official said is under construction at Orbital Sciences Corp. of
Dulles
,
Va.
, will carry 28 C-band and 24 Ku-band transponders. Early customers, some of who have signed 15-year contracts, include Vodamom International Ltd., a South African video provider; Gateway Communications Africa; and GilatSatcom.